525 B.R. 248
Bankr. W.D. Pa.2015Background
- Debtor Michele Kohar (with non-filing co-debtor husband Michael Kohar) executed a mortgage on their residence; the mortgage was foreclosed and a Beaver County state court entered and later affirmed a default judgment on July 26, 2011.
- The mortgage note was assigned through several entities; Rushmore Loan Management Services is the servicer and held a Limited Power of Attorney from the assignee to act on its behalf.
- The Kohars have a long history of serial bankruptcy filings (eight filings over ~2005–2014) aimed at delaying foreclosure; many prior Chapter 13 plans proposed de minimis payments and were dismissed for nonpayment or bad faith.
- On November 10, 2014 the sheriff sold the property to Wells Fargo; unbeknownst to Rushmore, Debtor filed a new bankruptcy petition minutes before the sale and sought to enjoin the sale.
- Rushmore moved for relief from the automatic stay nunc pro tunc to validate the sheriff sale, to dismiss the case with prejudice, and for Rule 9011 sanctions; the bankruptcy court held an evidentiary hearing and granted nunc pro tunc stay relief and other relief as set out below.
Issues
| Issue | Rushmore's Argument | Kohar's Argument | Held |
|---|---|---|---|
| Whether the bankruptcy court may relitigate the amount owed/foreclosure judgment | Judgment is final; Rushmore relies on state-court foreclosure judgment as establishing default and amount | Challenge standing/chain of title and amounts due | Rooker–Feldman bars relitigation; state-court judgment conclusively establishes default and the amount due as of that date |
| Whether Rushmore has standing / is a proper party in interest to seek stay relief | Rushmore is servicer with a May 9, 2012 Limited Power of Attorney from Wells Fargo authorizing foreclosure and sale | Kohars questioned chain of title and Rushmore’s authority to enforce the mortgage | Court found Rushmore’s POA sufficient; Rushmore is a proper party in interest to move for stay relief |
| Whether nunc pro tunc relief should be granted to validate the Nov. 10, 2014 sheriff sale | Sale should be validated: Rushmore checked the docket before sale, did not encourage stay violation; Kohars’ serial filings and conduct were unreasonable; denial would prejudice Rushmore | Debtor filed petition before sale and thus automatic stay should have blocked the sale | Balancing equities (Myers factors) favors nunc pro tunc relief: creditor was unaware, debtor acted unreasonably in timing/notice, and creditor would be prejudiced if relief denied; co-debtor stay annulled as well |
| Whether the case should be dismissed with prejudice and sanctions under Rule 9011 | Rushmore sought dismissal with prejudice to prevent further serial filings and sought sanctions for abuse | Debtor sought to proceed; procedural defects argued against sanctions | Court denied dismissal with prejudice (sale ratified so property is no longer estate asset) and denied Rule 9011 sanctions as procedurally defective (no separate motion; no 21-day safe-harbor/service shown) |
Key Cases Cited
- Great W. Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159 (3d Cir. 2010) (sets test for application of Rooker–Feldman doctrine)
- In re Myers, 491 F.3d 120 (3d Cir. 2007) (three-factor test and equitable balancing for nunc pro tunc annulment of stay)
- In re Miller, 501 B.R. 266 (Bankr. E.D. Pa. 2013) (discretionary nature of relief from stay and totality of circumstances analysis)
- In re Mullock, 404 B.R. 800 (Bankr. E.D. Pa. 2009) (debtor must show a reasonable possibility of successful reorganization within a reasonable time under § 362(d)(2))